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Contracts which are not in writing, although legally valid, are very often the subject matter of disputes, because the parties' recollections of what was agreed to can often differ dramatically. Incentive payments and commissions are another recurring focus of contract disputes.
The combined risk of disagreement when a contract for a commission agreement is made orally is considerable indeed, which makes it all the more remarkable that professional advice was not sought when the parties in a recent case entered into a business arrangement by way of an informal oral contract. The result was a costly High Court row in respect of the fees payable on successful completion of a property deal.
A property developer had engaged a company specialising in land acquisition planning to assist in the purchase of a site for a care home development. There was no written contract in respect of fees payable to the company and the only evidence that such an agreement existed was in the form of an email.
Through the company, the developer offered to purchase an appropriate site for just over £500,000. However, the deal eventually went through at a much reduced price of £325,000. The company claimed an incentive fee equivalent to 25 per cent of the difference between those two figures.
The developer denied that the company had contributed anything to the negotiation of the price reduction. However, the Court found clear evidence that the company had actively negotiated with the vendor on the developer's behalf and had been instrumental in achieving the deal. The parties reached a final settlement of the dispute in the light of the Court's findings.